Bertrand Competition in Markets with Network E¤ects and Switching Costs

In the paper we analyze duopoly competition at the market with network e¤ects and switching costs. We \u85nd that the evolution of the \u85rmsmarket shares depends on the single parameter which measures the relative importance of the switching costs coe ¢ cient compared to the network e¤ects coe ¢ cient. Apart from the known dynamics of the \u85rmsmarket shares in which the di¤erence between the \u85rmsmarket shares decreases in every period we also get monotone monopoly outcomeand alternative monopoly outcomein which the di¤erence between the \u85rmsmarket shares increases in every period with the dominant \u85rm keeping its position in the former case and loosing in the latter. We \u85nd that for high switching costs there is the only stable and stationary equilibrium in which both \u85rm share the market equally. For moderate network e¤ects there are two stable and stationary equilibria in which one of the \u85rms gains the whole market. And for very high network e¤ects there are no stable and stationary equilibria. We also show that under moderate network e¤ects the \u85r